Beanless Coffee: Will Big Coffee Players Allow Innovation to Brew?

Coffee has been experiencing a turbulent year due to concerns about supplies and pricing, with high future prices for Robusta beans in March and April. This surge in prices was triggered by long heatwaves and intense rainfall that disrupted supplies in Brazil and Vietnam, two of the most important coffee-growing regions worldwide. GlobalData suggests that prices stabilized in June but are still “at still-high levels,” with Arabica bean supply in surplus.

As questions mount about the impact of the climate crisis on coffee, start-ups developing alternatives to the conventional bean have entered the limelight, including US-based Atomo and Minus, Singaporean Prefer, and Dutch group Northern Wonder. Their products are principally sold online in their domestic markets and via the on-trade, though Minus, Atomo, and Northern Wonder are also sold in retail through independent stores and a small number of supermarkets.

Their coffee alternatives are made from a mixture of upcycled ingredients, such as chicory, dates, barley, and legumes. The caffeine for their beanless coffee is sourced in different ways, with Atomo and Minus using caffeine sourced from tea leaves, while Northern Wonder’s caffeine is synthetically sourced. To combine their ingredients, Minus and Prefer use fermentation, while Atomo uses a patented technology based on the Maillard reaction. Northern Wonder has two patents pending for its process, which focuses on fermenting, blending, and roasting non-tropical plants.

Investor interest in alt-coffee is growing, with Prefer bagging $2m in seed funding in February and large drinks producers starting to take a stake in the sector. Bean-free coffee is an important investment as climate change is likely to force coffee companies to adapt. Better Bite Ventures, an investor in early-stage climate and agri-food start-ups in the Asia-Pacific, backed Prefer earlier this year. Bean-less coffee start-ups are also generating more investor interest due to their novelty and potential to attract supporters of meat alternatives.

While Atomo is not disclosed about the companies with which it is in talks, CEO Andy Kleitsch says that there has been a groundswell of interest in what they’re doing due to the known supply chain issues that coffee is going to face over the next 30 years.

Beanless coffee makers are working to collaborate with larger companies to bring their products to a wider market. Prefer, founded by Jake Berber, plans to provide the biggest food and beverage companies with more affordable ingredients so they can continue to make margins while selling a product that the mass market can enjoy. Minus, founded by Maricel Saenz, believes that they can be allies to coffee companies struggling on the supply side of things and access some of their existing production farms.

Atomo CEO Andy Kleitsch says that consumers are not a barrier right now as long as the taste is so similar that consumers are not a barrier. Prefer has entered the market through cafes, bars, and restaurants in Singapore and is looking to establish distribution deals with larger on-trade locations. It is also looking to establish similar agreements with large-scale hotels to boost the quantities sold.

While alt-coffee is securing plenty of investment, a significant hurdle is getting major coffee producers to commit to adding their products to their coffee ranges. The coffee industry is now coming to grips with this new innovation and understanding how they will incorporate it into their product roadmap. Getting the likes of Lavazza or Nestlé to take on a new coffee innovation could be easier said than done, given the huge attachment coffee has to where it’s been sourced.

The people who generally push back the most were perhaps the ones closest to farmers. They took it as kind of a direct attack, while others just love the story of coffee, the romance of it, and the beautiful beans with different terroirs from different regions.

Explaining the risks that larger companies could see in adopting beanless coffee into their portfolio, Jim Watson, Rabobank’s Jim Watson, suggests that opinion could shift once larger coffee companies start investing in the start-ups. With the industry still hesitant, Watson believes alt-coffee could see the most success first by working with the on and off-trade. Some of the big gatekeepers in the industry will be buyers for big retail chains or cafe groups, and if a big grocery store chain decides that this has a much better offering than coffee, then that’s a big deal, so I think a lot of the battle may play out on that front.

Alt-coffee producers have had to prove their products perform in multiple formats to attract companies. Minus has two RTD coffee varieties and a cold brew concentrate, while Prefer is experimenting with caffeinated and decaffeinated ground products and RTDs. For Berber at Prefer, RTDs make it easier to provide consumers with the coffee-drinking experience they want. Better Bite Ventures’ Klar, for example, prefers RTD for its target market in Singapore, where most coffee is consumed iced, lightly sweetened, and with milk (often plant milk).

Watson at Rabobank sees RTDs as a good format for alt-coffee in its early days, given they are far more divorced from the coffee bean and its heritage. Atomo makes 100% caffeinated and decaf beanless ground coffees designed for espresso under its namesake label. It also produces hybrid medium and dark roast ground coffee for drip machines, made with 50% Atomo beanless grounds and 50% ground Arabica beans. The product is designed to appeal more to mass producers, says Kleitsch.

Predicting where beanless coffee will succeed is tricky when the segment is still small. For Saenz at Minus, it will depend on consumer tastes. For instance, the Asian community enjoys coffee differently than those enjoyed in Italy, Germany, and the US. Market growth is tied to where supply chain pressures will be felt first, which we can’t tell just now.

When it comes to price, most producers in alt-coffee are some distance from hitting parity with the coffee giants. Atomo’s ground products are on par with specialty coffee, meaning they can only succeed in a limited number of markets. To come in at that price point, they are looking at markets that have big specialty segments, mostly in the US, western Europe, Japan, and possibly in South East Asia.

Another important factor will be attracting consumers that accept an alternative to coffee produced in a very unconventional way. A culture that really likes technology will be essential for attracting consumers that accept an alternative to coffee produced in a very unconventional way.

Beanless coffee makers are determined to deliver positive changes through tie-ups with major companies but it may be a while before the idea is received with open arms. Suntory Holdings, which made its investment in Atomo in 2023, has been supportive of the idea of beanless coffee but is not willing to commit to a partnership just yet. Watson at Rabobank believes it could be fairly slow adoption from big roasters to add something into their portfolios, especially because of what it would take to perform a licensing deal.

Just like any good brew, beanless coffee’s future development will take time.

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